Solutions

When you're looking at spending and budget issues, annualize everything. For instance, are you spending $10 a day on lunch? If you bring something from home, it will cost perhaps $3. That $7 a day that you save is $35 a week, over $1500 a year.

It's a lot easier to get motivated to make small spending changes when you see the annual cost.

This one works great! Hubby pointed out that he saw big fluctuations from month to month on our grocery spending. I've decided that $400 should be enough for a month of groceries.

Ad

On the first of each month, I go to my favorite grocery store and purchase a gift card for $300. I also buy gift cards for other stores (pharmacy, Target, Walmart) which will equal $100. So at the end of the month the tally should only be $400.

Take out any credit cards or checks from your purse/wallet and only have the gift card as an option to spend money. This forces you to only spend as much as the amount on the gift card. You could also divide your gift cards so the amount is what you need on a weekly basis and only take "this week's card.

If you think you may over spend or go to a store that you haven't bought a gift card, write ONE check, and put in the To: section the Store/Vendor name. That will limit you from wandering into different stores and buying impulsively. Leave all other checks and gift cards at home.

It works because you cannot spend over your budget and you can't buy anything from another store impulsively. If you must have a certain thing from a certain store, put one check in your wallet with the name of the store already filled out. If you have only gift card, you must add up the cost of the groceries or perhaps "put things back". I usually count, rounding most prices "up" instead of down. Not having enough $ at the register might be make you feel embarrassed so you will probably stick to your list.

Ad

This can be used for gasoline or other specialty stores. Most stores have some type of gift card available.

Know what you have cash in your checking account for the month. Without a credit card for dentist, doctor and monthly emergencies for the kids, I never was able to budget cash for those emergencies. So, it was either pay partial on a phone, electric or food bill or every time I got a raise, even if only amounting to $5.00 a month after the increase in health insurance and/or taxes, the extra went into savings.

Never get used to extra money or raises, on a daily basis. Put it into a bank, different from your checking account if your tempted to easily transfer every month into daily living. Make it difficult to reach, but readily available for that cash deserving emergency.

Ad

Once the media and economists would recommend having a $1000 reserve in your saving for these emergencies (even with credit cards) but I was never able to accumulate much more than $200 or $300 hundred dollars before the dental or appliance breakdown occurred. But, a refund from taxes or a pay raise, got me through a lot of those daily crisis that had to be paid cash.

Buying my first home was the best investment I ever made. But, my objective was different than many young people today. My desire was for the girls to live in a neighborhood and have a stable environment, even though I had recently divorced. At the time, GI Loans were assumable and I had exactly $4000 dollars after the divorce, to save or spend. But, it would be without child support and wasn't much, even by housing prices in the 70's. So I searched for weeks and house hunted for sale by owners, looking for a assumable loan.

Ad

I didn't have a job, didn't have credit and didn't know much of anything, but knew I could babysit, clean houses, work as a waitress whatever as long as it was honest, and was close to a college or night school. So, the house was strictly a matter of neighborhood normalcy, price and conditions of purchase. I found it in a visually dull, nondescript, fixer upper. Assumable, 4% GI Loan (1973) and need of paint, carpet and numerous other things I thought I could do. Same monthly payment as the apartment the girls and I were living in, in another city at the time.

Sometimes ignorance is bliss because things I couldn't fix did go wrong. The heater, the swamp cooler, the roof caved in years later while my company went on a wild cat strike. But, when things were disastrous, friends and neighbors came to the rescue with help and advice, that taught me how to do things and also that God helps those who help themselves.

Ad

I found a good job, worked part time jobs, and painted and fixed. Later I sold at a profit and had the house built that happened to end up at a 17% interest rate, while I was only making $7.00 a hour. That house payment almost killed me, but more part time work, cooking economically, heating with wood, the daughters going to work in high school while doing a team sport at the same time, and just saying no! To all the things the other kids had, or that I dearly wanted to give to compete with the Jones or feel like I was being a "good mother", ultimately showed me that what the girls and I gained in our relationship. Their independence, common sense and maturity was worth far more than the gifts, toys and events that many young parents think they must provide or have for themselves.

The amount of saving each month on these issues went from small to large, but could be gauged by the amount of cash left over for allowances or school lunches for the girls. Often, near to tears, it didn't seem like I could make it another month or go another day, without some relief from the poverty that I felt. I knew I had a job, I always found some other work for extra cash, and miracles happened all the time.

When the roof caved in, my elderly neighbor said her son did roofs. He would take payments, she said. So, I suspect she paid him for the new roof, and I paid her $25 a month for 3 years before she said that he said it was paid off. I gave my last dollar for coffee and lunch for the remaining two week period of the month to a young mother who had driven her 2 month old baby out in the winter, to sit and check out her husbands whereabouts, one night, and run out of gas. The dollar went to get her home with gas in the car. Two days later, my mother, who was also single mother, sent my daughter a $5.00 birthday gift. Sorry, Mom, but the birthday gift was a $3.00 birthday party and two dollars for me to eat.

By Leslie from Albuquerque, New Mexico

Editor's Note: Because Leslie's essay is longer than our usual submissions, we are publishing it in 6 sections. We will post the next section soon. Here are the previously posted sections:

I pay bills by direct debit/check. Then I get my monthly allotment for groceries, gas, etc. in cash which I have in an envelope in my purse. After each purchase I put the receipts back in the envelope with the balance of my cash.

I am not new here, but I have a problem. I don't know how to hold on to money. I get paid bi-weekly and am trying to payoff some very old debts to get my credit back together.

How do you go about taking care of that? By the next day, I don't even have enough to buy a soda. I don't have the large responsibility of paying the bills. My dh does that.

I need to know how to start having money from week to week. I owe a lot. I would like to get a new car by summer. I can't even open a checking account because I am in collections with the banks. Will someone please help me with maybe a basic budget or using the old fashion envelope method. I need to get back on track by summer because I won't have a income coming in for two months because of the type of work I do. I am sorry for the long question. Help.

Answers

Are you paying your self first or setting to much money aside every week for debt re-payment, I am still quite unsure of the situation, and also maybe it would help if your DH and you sat and did the finances together, it seems to me that he is doing it all and you are at a huge loss It takes to to get debt when married and it takes to to pay it off it is not easy but with his help you may just come out on top!

You have to figure out where your money goes. I'm not talking about writing down every penny, because I'm pretty organized and even I don't like doing that. But a simple 'what comes in' and 'where it goes' kind of list will help you figure it out.

You say you're broke the day after payday. Well, where is the money going? Is it all necessary bills? List out what gets paid every month. Then put them in order of priority. Maybe you'll see you're spending money on un-necessary things (e.g. take out food, movies, etc.) or bills that could have been prevented (credit cards)?

After you have it all listed out, try to cut back to mostly necessary things (rent, utilities, food). Then take the money you don't spend on unnecessary things and channel it over to 1) savings, to build it up, and/or 2) loans or credit card bills that charge interest.

Make a commitment to 1) stop using a credit card or getting loans, and 2) make a plan to pay off credit cards/loans. This will take some work and commitment and time, but the payoff is big. Down the line, after the last payment of a particular recurring debt, start putting that amount towards another debt, or into savings.

You say you want to buy a new car by summer. Well, that sounds really unrealistic. Lower your expectations; get a used car, if it's necessary at all. You sound like you might be relying on loans to get you through things.

I can tell you from my own experience, it will be a fantastic feeling to get things under control and be able to build up savings. But you have to decide to do it, and then just do it.

Are these old bills yours alone or are they combined bills? If they are combined you and your husband should be putting your money together and figuring out what goes where. Do you absolutely need a car, is there bus service where you live? Where I live you can buy a one month bus pass for $25.00 and that is a lot cheaper than maintaining and running a car. When I graduated from high school I went and lived with an aunt and uncle because I got a job where they lived. I paid them rent and when I wanted to go out I did a lot of walking, as far as that goes I walked one mile each way to and from work. But my aunt used the envelope method.

My uncle paid the mortgage payment, utilities, etc. He gave my aunt a certain amount of money for groceries and small household expenses that she might want, her clothing and spending money. It worked well for her. She had an envelope for each week's worth of groceries, one for each weeks of other misc. household expenses, and one for spending money. My uncle only got paid monthly. I do this to a certain extent, only I don't use the envelopes. I make sure the necessities are paid, like rent, utilities, etc. Any money that is left over is for what I call fun items. I am on Social Security of $700.00 a month and that is what I live off. I don't use the regular city buses because I can't walk that far. I use the cities paratransit buses and they are $2.00 each way. I only use them when I absolutely have to go someplace, otherwise I stay home.

Google make your own mixes; save a lot of $ by making your own mixes; mayonnaise; etc; www.ehow.com has lots of good ones; so does allcoooks.com; busycooks.com;Use baking soda and vinegar etc to clean with; use microfibers; stop putting your cash in the trash! Cook once and eat several times; easy in refrigerator is handier than eating out; tastier and healthier to! Have "poker parties" using chips or pennies; play card games; etc; for "entertainment"; put the $ you would normally use on these things to the side and see how fast it adds up!

This is only a variation on the tried and tested envelope idea but what about using canning jars for a month instead of envelopes so you can actually SEE the money you have set aside for things. It will either go down if you haven't been realistic about the amount you needed or (hopefully) you will find the will to keep something in the jars. This works particularly well if you have smaller denomination bills and change in the jars. Then you can say ok I have $5 I can and I am going to buy what I need with that.

It is a bit like quitting smoking, you have to make up your mind that you want to change your spending habits before you can.

Its may be a difficult idea to grasp but people who don't have any money don't buy soda every day because they can't afford it and many people who have money don't buy soda every day because they realsied a long time ago they didn't need it!

I really hope you can set yourself free from your money worries as you are the only one who can.

Sorry me again, the other posters are right you do not need a new car by the Summer. That is another way to set yourself free. We are the proud owners of an 8 year old deisel Toyota with 200,000 on the clock. The day we said we actually don't need to buy a new car this year so do we really want to? was the day we began to be able to save for our retirement!

One of the best places to save money is in your food budget. This site has a menu that will feed 4 to 6 people for $70.00 a week, and it comes complete with a shopping list, recipes and an action plan:http://www.hill 70dollarmenu.htm

You can go to your local Consumer Credit Counseling. It is a free service. They help you organize all of your bills, contact all of your creditors, and help you with a budget plan. The monthly budget worksheets are very helpful. If you feel "out of control" with the situation, they will help you back to a feeling of order and control. I used this service many years ago and it was a life saver.

I would like to know if anyone is using the old fashion method of budgeting using envelopes. I don't know how to set them up and what items to put on them. I thought this would help me control my spending and start paying on my debt and stop living from check to check. I have not even enough money to buy a cup of coffee. I never have money. I get paid on thursday and by friday I am broke. Help me please.

Now what you are doing is putting in each envelope what you have allowed from your paycheck.For ex. if you have allowed $80.00 for groceries, you want to put exactly $80.00 in that envelope and only take that and a calculator to the store with you. You need to leave the checkbook/debit card at home. Your goal is to only use a check book for your bills and not to use a debit card any longer. If you cannot pay for it with the cash that you have saved up then you may need to wait a little longer to buy it.

Here are the next steps, after you leave the grocery store, if there is any money left over, you put it back in that envelope along with the receipt and write it on the front of your envelope. You want to keep a log of your expenses so actually see where every penny is going.

If you put exactly in your envelopes what your budget allows, you should be able to hopefully save some money along the way.

I am sorry if I am just rambling, if you don't understand or need more help please feel free to contact me and I can send more info.

I suppose each persons envelopes will be labelled differently. I did this for a while also during a period when money was tight. My envelopes were labelled:ElectricityPhone/MobileInsurance (Car & Home)Mortgage (or Rent)I did have some others also but you basically need to work out what expenses you have on a regular basis. Some of mine were paid monthly and others quarterly.....I worked out what the average for each bill was PER WEEK and each week I'd put that amount into the allocated envelope. Whatever was left I'd use for groceries and petrol/gas. If I was lucky to have anything left over it was up to me how I'd use it.I hope I've made sense and good luck with setting your system up. It works if set up properly.

We also use the envelope system and I love it! I've been able to slash my grocery bill nearly in half because it forces me to think about everything I purchase.

What I've found that works best for me is to use the envelopes for those categories that I go to a store for, such as gas, groceries, clothing, etc. As SAHM2three noted, I only put the budgeted amount in the envelope and once it's gone, I'm done. This helps me to really track how much I spend for everything.

One of the best paybacks on the envelope system (assuming you keep the envelopes under lock and key so nobody can help themselves) is that if you have money left over in the grocery and gas envies, you can put it in savings! I love the feeling that we have a little something for emergencies. Most financial advisors recommend 3-6 months income, in case of disaster. Another good thing is that you get a solid idea of how much you actually have to spend. Sometimes we overspend because payday seems so rich!

I don't use the actual envelopes. I just write budget on paper and keep track of spending. But I thought you might use this "jump-start" on a budget. Don't spend any money for one week(or longer if you can). Eat food you already have. Pack lunch for work. (It's OK to plan the week before, like making sure there is gas in the car,etc.) It's easier than it sounds and at the end of the week you will have saved almost a whole week's paycheck. I have actually done this, paying only bills due, and not buying anything that wasn't Absolutely Necessary. Thinking that you only have to do it for one week - not the rest of your life -helps. And you'll be proud of yourself after. And pretty soon you'll be ready to do it again.

The envelope system works great. The key is not to borrow from one to another. Update the "budgeted" amount every 3 months. Whatever money is left in an envelope after bill paid divide in two, put 1/2 in the bank and have fun with the other 1/2. I personally think the system give you a sense of accomplishment!

When we were living on a VERY tight budget, we used this system and it really helped. We kept our envelopes standing up in a shoebox, but like somebody else mentioned, you might want to keep it under lock and key for safety's sake.

We went through past bills to determine what were recurrent expenses (those were usually very close to the same amount each month) and made those envelopes out first, writing the amount to be put into the envelope on the outside: Tithing, rent/mortgage, power, natural gas, water, trash, phone, car fuel, car insurance, renter's insurance/homeowner's insurance. Then we started fleshing out the "other stuff" that comes up that is also important to consider, or could be less predictable/more flexible: haircuts, postage, food, car maintenance/repairs, home maintenance/repairs, emergency, clothing, savings, gifts, entertainment.

We figured out how much our varying insurances cost each year, and divided that number by the number of paychecks coming in, and put that amount in the envelope so that the funds would be ready when the bill arrived. We did the same thing with home maintenance/repairs, car maintenance/repairs, gifts, clothing, postage (we always spent more on this around the holidays and to send birthday/mother's day/father's day cards to our parents). We even figured out how many haircuts my husband and I would each need throughout the year, and divided that up too!

When we took money from the envelope, we put in a slip of paper noting how much we took out. When we had money to return to the envelope (such as after a haircut or grocery shopping), we put in the receipt for funds spent, and noted on the slip of paper how much we had spent, how much was returned to the envelope, and what the new balance in the envelope was.

Our process may sound a bit over the top, but it really helped us to figure all this out so that expenses didn't "sneak up on us" and blow our budget. It also make us really accountable for where every single penny went.

When we got paid, we went to the bank with a list of how we needed to have our money broken down. We would give the teller a list of how many twenties, tens, fives and ones (and even quarters, dimes, and nickels!) we needed so that we could divvy up the money exactly as we needed it.

As we planned our budget together, we realized that entertainment might mean we would invite other couples over for popcorn, lemonade and board games instead of going out to eat or see a movie. We realized that it would be better if we did our own oil changes instead of taking the car to the mechanic. We realized that we needed to prepare our meals from scratch instead of using as much prepared foods. We cut out soda. We set some limits on how much we were willing to spend for birthday and Christmas gifts for our family. It made us think hard about how much we really needed in the way of clothing.

When my husband was in the military, our medical and dental coverage wasn't something we needed to make budget envelopes for, but now that he's no longer in the service, that's something that we have to budget for so that we can meet our co-pays when we need to see the doctor or fill a prescription.

Someone else mentioned being able to limit expenses for a week to build up some funds to help to get this process going. We found it helpful to get a month's worth of funds built up so that the instant a bill came in, we could pay it right away, and not have to wait until the next time the envelope received a deposit from the paycheck. It feels so great to be able to pay your bill the same day it comes!

It takes thoughtful and careful planning in order to stretch each penny to cover the necessities. You have to think creatively to find ways to "make do" when funds are tight. Learning these habits early will be a blessing to you for the rest of your life.

These stories take me back...to 1964, my husband made , brought home $50 a week. Our rent was $50. a month...I was allotted $10 per week for groceries, I knew the price of everything and only bought that. I put $12.50 a week in the envelope for the monthly rent, everything included in those days. We had one other very small bill and other than that we had nothing left most of the time. We did not even get chips, soda, etc.

Fortunately, not long after he got a better paying job and things got better.

Can you get a part time job in addition? Maybe you could get a better paying job. Sometimes that is possible and certainly would help.

Things will get better for you, mainly because you are TRYING to do something about your situation.

When our children were born, in the 70s we used this system but Ididnt know there was a name for it. I did it this way so I was sureto have the bill money. Sometimes somehow I would end up with $5extra. I was so happy to be able to save that. I had one extra envelope labeled extra money. Even if there was .25 extra it went inthere. In those days my husband earned $4.50 an hr. Our rent was$125 a month. I would buy a roast and cut it in thirds to get 3meals worth. A pound of hamburger was 2 meals.. etc etc. We had to stretch as far as we could.. we drank kool-aid so we had milk for the baby.. milk was .88 a gallon. And like another poster,I knew the price of everything and only bought exactly what was needed. Gas was .28 a gallon an my husband being a smoker his$5 a week allowance didn't last tho his cigs were .33 a pk. Funny now to think how we would always get $1 worth of gas and it lasted most of the week. I remember a station in town saying*you know one day gas will be $1 a gallon*.. I would just twirl my eyes and think .. yah right. But somehow we survived. And I might add we never ever even thought of borrowing money from anyone.

One reason I love this site is because there are always poststhat take me back to yesteryear. Its so hard for young people these days. We help our children as much as we can.. we are always reminded that if someone had helped us maybe life would havebeen somewhat easier. Thanks for the memories.

My Mom loves to tell me about how she used to budget with envelopes because her and my father were very poor. First, get a stack of envelopes and write down what you spend your money on starting with necessities like rent, utilities, gas, food, debts you owe, etc. Use only one category per envelope and also write down the amount you need for each one. Then you can write down your "other" envelopes.

Be specific and remember to use only one category for each envelope. Starbucks, clothes, shoes, eating out, going out/entertainment,etc. Now, cash your check. Go through each envelope starting with your necessities first and put the amount of money written on the front inside the envelope. Make sure you do these first then move on to your "other" envelopes...

If there is money left over, decide how you want to spend it and STICK TO IT! If you start shuffling money from envelope to envelope, you may as well stop. Once it goes in, it only come out for the reason on the envelope.

This will not only help you budget your money, it will show you how much you waste without even knowing it because when you stop to get something you have to take the money out of an envelope to buy it and you will stop and think. Also, pay off your debt before you go out shopping. You will feel great debt free and actually start saving money once you see where it is going!It worked for me... Good Luck

Archives

I am a recent college grad and looking for tips on how to set up a budget. I work as a waitress, so my imcome varies, and a large portion of it is cash. I am a responsible person and haven't had many money problems, but feel like I need to get better control over my finances. Any advice on bill paying, budgeting, etc. would be greatly appreciated.

Thanks! Samantha from Davis, CA

Answers:

Setting Up a Budget

You need to have 3 accounts:

immediate expenses

saving up for large purchases (car, TV, etc.)

a regular savings account

Set up a ROTH IRA for retirement. Talk to your banker or a broker like the Smith Barney brokerage. (10/20/2005)